As Dogecoin price surges after tweets from Elon Musk and Mark Cuban, it is time to learn Cryptocurrencies.
With digitalization touching every aspect of our lives, is it time to beyond fiat currency – burn these off and dispose of them in exchange for digital binaries, better known as Cryptocurrencies? People differ about cryptocurrency – some term it as the future of humanity, while some outrightly reject it saying it's gambling and a recipe for financial disaster.
First, you need to understand three fundamental concepts of cryptocurrency – Bitcoin, Blockchain, and Cryptocurrency.
Bitcoin is the name of a leading cryptocurrency. -- it is digital and electronic and exists as a code.
Cryptocurrency is the medium or the platform for exchanging Bitcoin. It is electronic money. -- just like paper currencies exist for exchanging dollars, euros, rupees, etc... Crypto stands for 'data encryption that makes the transaction secure. However, crypto exists only in the digital mode and has no physical form.
Blockchain is a file that stores cryptocurrencies. (It is technology). -- They are the basis of cryptocurrencies but are not just limited to cryptocurrencies – they have multiple uses.
According to Investopedia, "A cryptocurrency is a form of digital asset based on a network that is distributed across a large number of computers. This decentralized structure allows them to exist outside the control of governments and central authorities. The word "cryptocurrency" is derived from the encryption techniques which are used to secure the network. Blockchains, which are organizational methods for ensuring the integrity of transactional data, is an essential component of many cryptocurrencies. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation" [1]
Who is the Creator of Bitcoin?
Interestingly, no one knows who the creator of Bitcoin is – some say it is Satoshi Nakamoto, but there is no surety. However, Nakamoto himself denies any role in cryptocurrency. He, however, worked on a concept called Double Spending – it simply means that when using physical currency, you cannot spend the same dollar note on buying two things, but in the digital medium, you can do so by hacking or manipulating systems.
No Fee or Commission Cryptocurrency Transactions
In the conventional money system, banks act as middlemen and stop this from happening and, in the process, earn some commission of the transactions made by the customer. Bitcoin solves this issue because it is decentralized, wherein community users regulate the transactions. All transactions are recorded, and any hacking gets noticed instantly. There is no fee or commission you need to pay with cryptocurrency transactions. Also, crypto is not impacted by inflation and currency debasement.
Bitcoin/ Cryptocurrency Pros
However, there are pros too. For one, the digital transactions are irreversible, and the value fluctuates tremendously because the law of demand and supply determines the Bitcoin price. Also, digital currencies are stored in our phones and laptops – devices that are vulnerable to hacking. That is why it is essential to create strong passwords that are difficult to crack.
Anyone Can Create Cryptocurrencies!
There are more than 4000 Cryptocurrencies today in the world. There are so many because crypto is open source, and anyone can create cryptocurrencies. Many countries in the world recognize cryptocurrency as legal, but not yet in India. Digital currency is the future of money, but it also involves gambling. That is why you need to be smart in your decisions. Eventually, be prepared to win some and lose some.
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Published by: Book Club
Source: NewsService
Release ID: 17990